LAND DISPOSITION, DEVELOPMENT AND FUNDING AGREEMENT BETWEEN THE COUNTY OF SAN BERNARDINO; BLOOMINGTON I HOUSING PARTNERS, L.P.

Transcription

1 LAND DISPOSITION, DEVELOPMENT AND FUNDING AGREEMENT BETWEEN THE COUNTY OF SAN BERNARDINO; BLOOMINGTON I HOUSING PARTNERS, L.P.; AND BLOOMINGTON LIBRARY DEVELOPER, LLC, Dated as of February 11, 2014

2 TABLE OF CONTENTS Page ARTICLE 1. DEFINITIONS AND EXHIBITS...3 Section 1.1 Definitions...3 Section 1.2 Exhibits ARTICLE 2. PURPOSE AND OVERVIEW...15 Section 2.1 Scope and Purpose of Agreement Section 2.2 Phase I Property Section 2.3 Effect on Prior Agreements Section 2.4 Recordation of Memorandum of this Agreement ARTICLE 3. COUNTY LOAN PROVISIONS...16 Section 3.1 County Loan...16 Section 3.2 Interest...17 Section 3.3 Use of County Loan Section 3.4 Security Section 3.5 Repayment Schedule Section 3.6 Conditions Precedent to Disbursement of County Loan Section 3.7 Reports and Accounting of Residual Receipts...20 Section 3.8 Developer Fee Section 3.9 Assumption Section 3.10 Subordination Section 3.11 Non-Recourse Section 3.12 NSP3 Requirements Section 3.13 Anti-Lobbying Certification ARTICLE 4. COUNTY GRANT...28 Section 4.1 County Grant Section 4.2 Addition of Grantee Section 4.3 Use of County Grant Funds Section 4.4 Intentionally Omitted Section 4.5 Conditions Precedent to Disbursement Section 4.6 Intentionally Omitted Section 4.7 Assumption Section 4.8 Supplemental Operating Expense Reserve ARTICLE 5. PREDISPOSITION REQUIREMENTS...32 Section 5.1 Conditions Precedent to Conveyance Section 5.2 Land Use Approvals Section 5.3 Conceptual Site Plan Section 5.4 i Creation of Parcels, Subdivision Approval and Recordation Section 5.5 Other Governmental Approvals Section 5.6 Financing Plan Section 5.7 Evidence of Availability of Funds Section 5.8 Evidence of Insurance Section 5.9 Reciprocal Easement Agreement Section 5.10 Library Facility Lease....36

3 TABLE OF CONTENTS (Continued) Page ARTICLE 8. ONGOING DEVELOPER OBLIGATIONS...55 Section 8.1 Applicability Section 8.2 Use Section 8.3 Records Section 8.4 Audits Section 8.5 Maintenance Phase I Development Section 8.6 Taxes and Assessments Section 8.7 Hazardous Materials Section 8.8 Management Plan and Procedures Section 8.9 Management Agent; Periodic Reports Section 8.10 Approval of Management Plan Modifications ii Section 5.11 Tax Credit Reservation; Other Financing Section 5.12 Other Approved Financing Section 5.13 Water Impact Payment Section 5.14 Sewer Impact Payment ARTICLE 6. LEASE OF PROPERTY...39 Section 6.1 Leases Section 6.2 Opening Escrow Section 6.3 Closing Section 6.4 Condition of Title Section 6.5 Condition of Affordable Development Parcel Section 6.6 Condition of Library Parcel Section 6.7 Costs of Escrow and Closing ARTICLE 7. CONSTRUCTION OF IMPROVEMENTS...48 Section 7.1 Construction Pursuant to Plans Section 7.2 Building Permits Section 7.3 Construction of Improvements Section 7.4 Change in Construction of Improvements Section 7.5 Commencement of Construction Section 7.6 Completion of Construction Section 7.7 Course of Construction Section 7.8 Construction Contract Section 7.9 Prevailing Wage Requirement Section 7.10 Equal Opportunity Section 7.11 Construction Responsibilities Section 7.12 Certificates of Completion Section 7.13 Mechanics Liens, Stop Notices, and Notices of Completion...53 Section 7.14 Inspections Section 7.15 Progress Reports and Information Section 7.16 Records Section 7.17 Relocation Section 7.18 Financial Accounting and Post-Completion Audits Section 7.19 Library Facility Lease Section 7.20 Accessibility....55

4 TABLE OF CONTENTS (Continued) Page Section 8.11 Insurance Requirements Section 8.12 Safety Conditions Section 8.13 Allowable Preferences Section 8.14 Marketing Plan Section 8.15 Notice of Litigation Section 8.16 Crime-Free Multi-Housing Unit Program Participation Section 8.17 Social Services Section 8.18 Mandatory Language in All Subsequent Deeds, Leases and Contracts ARTICLE 9. ASSIGNMENT AND TRANSFERS...71 Section 9.1 Definitions...71 Section 9.2 Purpose of Restrictions on Transfer Section 9.3 Prohibited Transfers Section 9.4 Permitted Transfers Section 9.5 Effectuation of Certain Permitted Transfers Section 9.6 Other Transfers with County Consent ARTICLE 10. DEFAULT AND REMEDIES...75 Section 10.1 General Applicability Section 10.2 Fault of County Section 10.3 Fault of Developers Section 10.4 Remedies Against Developers Section 10.5 Right to Cure at Developer's Expense Section 10.6 Collateral Documents...79 Section 10.7 Rights of Mortgagees Section 10.8 Remedies Cumulative Section 10.9 Waiver of Terms and Conditions Section Limited Liability of Tax Credit Investor ARTICLE 11. SECURITY FINANCING AND RIGHTS OF HOLDERS...81 Section 11.1 No Encumbrances Except for Development Purposes Section 11.2 Holder Not Obligated to Construct Section 11.3 Notice of Default and Right to Cure Section 11.4 Failure of Holder to Complete Affordable Development Improvements Section 11.5 Right of County to Cure Section 11.6 Right of County to Satisfy Other Liens Section 11.7 Holder to be Notified Section 11.8 Estoppel Certificates ARTICLE 12. REPRESENTATIONS, WARRANTIES AND COVENANTS...83 Section 12.1 Developer Representations and Warranties Section 12.2 Warranties Section 12.3 Effect of Representations and Warranties Section 12.4 County Representations and Warranties iii

5 TABLE OF CONTENTS (Continued) Page ARTICLE 13. GENERAL PROVISIONS...86 Section 13.1 Notices, Demands and Communications Section 13.2 Non-Liability of County Officials, Employees and Agents...87 Section 13.3 Forced Delay Section 13.4 Inspection of Books and Records Section 13.5 Provision Not Merged with Leases Section 13.6 Title of Parts and Sections Section 13.7 General Indemnification Section 13.8 Applicable Law Section 13.9 No Brokers Section Severability Section Venue Section Binding Upon Successors Section Parties Not Co-Venturers Section Time of the Essence Section Action by the County Section Complete Understanding of the Parties Section Entry by the County Section Amendments Section Operating Memoranda Section Multiple Originals, Complete Understanding of the Parties Section Recordation of Agreement Section Multiple Originals; Counterparts Section Mutual Cooperation Section Survival Clause and Termination of Covenants Section Separate Parcels Exhibit A-1: Legal Description of the Property Exhibit A-2: Conceptual Site Plan Exhibit B: Schedule of Performance Exhibit C: Approved Financing Plan Exhibit D-1: Housing Lease Exhibit D-2: Library Lease Exhibit E: Regulatory Agreement Exhibit F: Promissory Note Exhibit G: Leasehold Deed of Trust Exhibit H-1: Memorandum of Housing Lease Exhibit H-2: Memorandum of Library Lease Exhibit I: Form of Residual Receipts Report Exhibit J: Library Facility Lease Exhibit K: Scope of Water Improvements and Sewer Improvements Exhibit L: Form First Amendment to Disposition Agreement Exhibit M: Special Terms and Conditions Exhibit N: Completion Guaranty Agreement Exhibit O: Memorandum of DDA Exhibit P: Form of Certificate of Completion iv

6 LAND DISPOSITION, DEVELOPMENT AND FUNDING AGREEMENT (Phase I- Bloomington Mixed Use Development) This Land Disposition, Development and Funding Agreement (the "Agreement") is entered into as of February 11, 2014 (the "Effective Date"), by and between the County of San Bernardino, a political subdivision of the State of California (the "County"), Bloomington I Housing Partners, L.P., a California limited partnership (the "Affordable Developer"), Bloomington Library Developers, LLC, a California limited liability company (the "Library Developer"), with reference to the following facts, understandings and intentions of the parties: RECITALS A. These Recitals refer to and utilize certain capitalized terms that are defined in Article 1 of this Agreement. The Parties intend to refer to those definitions in connection with the use of capitalized terms in these Recitals. B. The County is the fee owner of approximately nine (9) acres of real property located in the unincorporated area of the County known as Bloomington as more fully described on Exhibit A-1 attached hereto and incorporated herein by this reference (the "Property"). C. On July 3, 2012 the County issued a Request for Qualifications to select a developer to assist in developing the Property into a mixed-used development with housing, commercial, and community uses. Based upon the proposals submitted and interviews with applicants, the selection committee recommended Related for development of the Property and in February 2013, Related and the County entered into the ENRA to negotiate the disposition and development of the Property. D. On February 26, 2013, the County and Related entered into a Predevelopment Loan Agreement, under which the County provided Related Eight Hundred Thousand Dollars ($800,000) of NSP3 Funds to fund the predevelopment costs for the Development (the "NSP3 Predevelopment Loan"). E. To facilitate the financing and development of the Property, the parties intend to subdivide the Property to create the following parcels: (1) the Affordable Development Parcel; (2) the Library Parcel; and (3) the Phase II Development Parcel. As further described in this Agreement, the subdivision of the Property will occur in multiple steps. F. The County and Related desire for the Affordable Developer and the Library Developer to construct the Phase I Development. Pursuant to the terms of this Agreement, the Affordable Developer will own and operate the Affordable Development Improvements on the Affordable Development Parcel, as multi-family and intergenerational rental housing to be made available to and occupied by extremely-low, very-low and low income households. Pursuant to the terms of this Agreement, the County will lease the Affordable Development Parcel to the Affordable Developer for such purpose. The County will retain ownership of the fee simple interest in the Affordable Development Parcel. 1

7 G. Pursuant to the terms of this Agreement, the Library Developer will own and maintain the Library Improvements on the Library Parcel. Pursuant to the terms of this Agreement, the County will lease the Library Parcel to the Library Developer for such purpose. The County will retain ownership of the fee simple interest in the Library Parcel and upon completion of the Library Improvements, the Library Developer will lease specified portions of the Library Improvements to the County, which the County will operate a public library servicing the Development and the general Bloomington community. H. The Affordable Developer intends to finance the costs of developing the Affordable Development with sources that include, but are not limited to, the County Loan, the County Grant, Tax Credit Funds, MHSA Funds, and private lender construction financing. This Agreement shall govern the disbursement of the County Loan and the County Grant for the development costs associated with the Infrastructure Improvements and the Affordable Development. This Agreement shall govern the disbursement of the County Loan and the County Grant for the construction of the Affordable Development Improvements I. The Library Developer and the County intend to finance the costs of developing the Library Improvements with sources that include, but are not limited to, NSP1 Program Income and CDBG Funds. The Library Lease shall govern the disbursement of the Library Funding for the construction of the Library Improvements. J. The County has determined that the Developers have the necessary expertise, skill and ability to carry out the commitments set forth in this Agreement and that this Agreement is in the best interests, and will materially contribute to the implementation of, the County's vision to create a vibrant economy and sustainable system of high-quality education, community health, public safety, housing, recreation, arts, culture and infrastructure and the timely construction of the Phase I Development. K. The amount of the County Loan provided pursuant to this Agreement does not exceed the amount of County assistance necessary to make the Affordable Developer's acquisition of the leasehold interest in the Affordable Development Parcel and the construction and operation of the Affordable Development, as restricted by this Agreement, financially feasible. L. Pursuant to the California Environmental Quality Act and its implementing guidelines, the County (in its capacity as "lead agency"), has prepared, and concurrently with the approval of this Agreement, reviewed and approved the Mitigated Negative Declaration (the "Negative Declaration") for the transactions contemplated by this Agreement, following a duly noticed public hearing. The Negative Declaration serves as the environmental documentation for the County's consideration and approval of this Agreement and the transactions contemplated by this Agreement. M. In accordance with NEPA, prior to approval of this Agreement, County staff prepared and circulated for public review an environmental assessment and notice of intent to adopt a finding of no significant impact for this Agreement and the development contemplated by this Agreement (the "FONSI"). The County thereafter approved the FONSI after concluding that any mitigation measures set forth in the mitigated FONSI will mitigate any significant 2

8 environmental impacts associated with the development contemplated by this Agreement to a level of insignificance. N. The parties have negotiated this Agreement, setting forth their respective rights and obligations regarding the disposition and development of the Phase I Development. As further described herein, the parties anticipate executing the First Amendment to Disposition Agreement, in substantially the form attached hereto as Exhibit L. This Agreement, as such may be modified by the First Amendment to Disposition Funding Agreement, relates only to the development of the Phase I Development. The Parties anticipate that they will enter into additional agreements for further phases of the Development. THEREFORE, the County and the Developers agree as follows: ARTICLE 1. DEFINITIONS AND EXHIBITS Section 1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following definitions shall apply throughout this Agreement. (a) "Affordable Developer" means Bloomington I Housing Partners, L.P., a California limited partnership, and shall also be referred to as the Partnership. (b) "Affordable Development" means the Affordable Development Parcel and the Affordable Development Improvements. (c) "Affordable Development Improvements" means the one hundred six (106) units of affordable multi-family and intergenerational rental housing, including one (1) manager's unit, all common areas, amenities, appurtenances, improvement easements, buildings and fixtures associated with the Affordable Development. (d) "Affordable Development Parcel" means the approximately 5 acre condominium portion of the Property (including, without limitation specified airspace above the Library Parcel), on which the Affordable Development Improvements will be constructed and as more particularly depicted on the Conceptual Site Plan attached hereto as Exhibit A-2, incorporated herein by this reference. (e) "Agreement" means this Land Disposition, Development and Funding Agreement, including the attached Exhibits and all subsequent operating memoranda and amendments to this Agreement. (f) "Annual Operating Expenses" with respect to a particular calendar year means the following costs reasonably and actually incurred for operation and maintenance of the Affordable Development to the extent that they are consistent with an annual independent audit performed by a certified public accountant using generally accepted accounting principles: 3

9 Development; (i) Property taxes and assessments imposed on the Affordable (ii) Debt service currently due on a non-optional basis (excluding debt service due from residual receipts or surplus cash of the Affordable Development, but including the obligatory 0.42% due annually on account of the loan of the MHSA Funds) on loans associated with the development of the Affordable Development and approved by the County in the Final Financing Plan; (iii) Property management fees and reimbursements, not to exceed fees and reimbursements which are standard in the industry, and pursuant to a management contract approved by the County; (iv) Premiums for property damage and liability insurance; (v) Any annual license or Certificate of Completion fees required for operation of the Affordable Development; (vi) (vii) Security services; Advertising and marketing costs; (viii) Cash deposited into reserves for capital replacements of the Affordable Development in an amount to be approved by the County as part of the Final Financing Plan, as the same may increased during the Term with the approval of the County pursuant to Section 5.6; (ix) Cash deposited into an operating reserve in an amount to be approved by the County as part of the Final Financing Plan, as the same may increased during the Term with the approval of the County pursuant to Section 5.6, and annual operating budgets, but with the operating reserve capped at six (6) months of gross rent from the Affordable Development (as such rent may vary from time to time); (x) Asset management fee and, for the first fifteen (15) years of the Term, a partnership management fee, in the amount approved by the County as part of the Final Financing Plan; (xi) Utility services not paid for directly by tenants, including without limitation, water, sewer, and trash collection; (xii) maintenance and repair, including pest control, landscaping, grounds maintenance, painting and decorating, cleaning, common systems repair, janitorial supplies and services, (xiii) Social services fees and expenses; 4

10 (xiv) Annual audit fees, inspection fees, or monitoring fees required in relation to any Approved Financing; (xv) Extraordinary operating costs specifically approved by the County in its reasonable discretion; and (xvi) Payments of deductibles in connection with casualty insurance claims not normally paid from reserves, the amount of uninsured losses actually replaced, repaired or restored, and not normally paid from reserves, (xvii) Reasonable accounting fees and legal fees; and (xviii) Other ordinary and reasonable operating expenses approved by the County in its reasonable discretion and not listed above. (xix) Annual Operating Expenses shall exclude the following: depreciation, amortization, depletion or other non-cash expenses or any amount expended from a reserve account. (g) "Approved Financing" means the loans, grants, and other financing to be secured by the Developers, and approved by the County for the purpose of financing the costs of the Phase I Development which shall be consistent with the Approved Financing Plan. (h) "Approved Financing Plan" means the Financing Plan approved by the County as of the date of this Agreement, attached to this Agreement as Exhibit C, incorporated herein by this reference, as the same may be amended pursuant to Section 5.6. (i) "Assignment Agreement" means the Assignment of Collateral Documents pursuant to which the Affordable Developer assigns to the County its rights and obligations with respect to certain agreements, Plans and Specifications, and approvals, executed by the Affordable Developer and the County with regards to the NSP3 Predevelopment Loan and as a precondition to the making of the County Loan and the County Grant (j) "CalHFA" means the California Housing Finance Agency. (k) "CDBG Program" means the Community Development Block Grant ("CDBG") program under Title I of the Housing and Community Development Act of 1974 (42 U.S.C et seq.). Program. (l) "CDBG Funds" means funds allocated to the County under the CDBG (m) "Certificate of Completion" means the final Certificate of Completion issued by the County, or comparable County sign-off on the completion of construction of the Affordable Development Improvements and the Library Improvements. The form of Certificate of Completion is attached hereto as Exhibit P and incorporated herein by this reference. 5

11 (n) "CEQA" means The California Environmental Quality Act, California Public Resources Code , as amended. (o) "Close of Escrow" means the date of recording of the Memo of DDA, Memorandum of Housing Lease, Leasehold Deed of Trust against the Affordable Developer's interest in the Affordable Development Parcel and the recording of the Memorandum of Library Lease against the Library Developer's interest in the Library Parcel. (p) "Collateral" means and includes all right, title, interest, claims and demands of the Affordable Developer in and to the Collateral Documents, including contract rights and general intangibles, now existing or hereafter arising; and all amendments, substitutions for, and proceeds thereof, including, without limitation, insurance and similar payments. (q) "Collateral Documents" means the Developer s right, title and interest to all project agreements, including but not limited to development reports, all contracts, architect's agreements, engineer's agreements, management agreements, and all other contracts and agreements which concern the development and/or operation of the Phase I Development, all Governmental Approvals (including but not limited to all permits and licenses), plans, specifications, drawings, franchises, utility agreements and similar materials not yet obtained, and any other documents and information related to the Phase I Development, reports, Plans and Specifications, and general documents associated with the Phase I Development. For purposes of clarifying the foregoing, Collateral Documents shall expressly exclude any documents that, pursuant to applicable law, the Developers do not have the right to pledge and assign as contemplated by this Agreement. (r) "Commencement of Construction" means the date on which the construction commences on the Phase I Development et seq. (s) "Community Redevelopment Law" means Health and Safety Code Section (t) "Completion of Construction" means the date the Certificate of Completion for the Phase I Development is issued by the County. (u) "Completion Guaranty Agreement" means the agreement in favor of the County guaranteeing the completion of the Phase I Development in accordance with the terms of this Agreement, executed by The Related Companies, L.P., a New York limited partnership (as guarantor), the same entity executing such other guaranty agreements for the construction lenders set forth in the approved Financing Plan. The form of the Completion Guaranty Agreement is attached hereto as Exhibit N, incorporated herein by this reference. (v) "Conceptual Site Plan" means the schematic documents showing the basic physical characteristics of the Phase I Development and the location of improvements on the Property, including preliminary building plans and section and elevations of the Phase I Development. The Conceptual Site Plan is attached hereto as Exhibit A-2, incorporated herein by this reference, and includes the preliminary Plans and Specifications. 6

12 (w) "Construction Contract" means the construction contract approved by the County pursuant to the terms of Section 7.8 hereof. (x) State of California. "County" means San Bernardino County, a political subdivision of the County. (y) "County Board of Supervisors" means the Board of Supervisors of the (z) "County Documents" shall mean, collectively, this Agreement, the Housing Lease, the Promissory Note, the Leasehold Deed of Trust, the Regulatory Agreement, the Notice of Affordability Restrictions and all other documents required to be executed by the Affordable Developer in connection with the Affordable Development. (aa) "County Executive Officer" means the County s Chief Executive Officer. (bb) "County Event of Default" has the meaning set forth in Section (cc) "County Grant" means the grant in an amount not to exceed Seven Million Seventy-Five Thousand Eight Hundred Seventeen Dollars ($7,075,817) consisting of Housing Asset Funds made from the County to Affordable Developer pursuant to the terms of this Agreement. (dd) "County Loan" means the loan in an amount not to exceed Five Million Eight Hundred Seventy-One Thousand Dollars ($5,871,000) consisting of NSP3 Funds, County affordable housing funds and Housing Asset Funds (and subject to adjustments pursuant to Section 3.5(b)) made from the County to the Affordable Developer pursuant to the terms of this Agreement. (ee) "County's Prorata Share of Lender's Share of Residual Receipts" means, as determined at the Close of Escrow, the percentage resulting from dividing the County Loan funds disbursed to the Affordable Developer in accordance with the Agreement by the sum of such County Loan funds and MHSA Loan funds disbursed to the Affordable Developer in accordance with the applicable agreements. (ff) "Developer Event of Default" has the meaning set forth in Section (gg) "Developer Fee" means the fee paid to the Affordable Developer, Related or any affiliates thereof, in the amount and for the purposes set forth in Section 3.8. (hh) "Developers" means the Affordable Developer and the Library Developer collectively, and their successors and assigns as permitted by this Agreement. The term "Developer" means any of the Developers. (ii) "Development" means the mixed-used development with housing, commercial, and community uses consisting of the Phase I Development and the Phase II Development, which is also herein referred to as the "Bloomington Mixed-Use Development". 7

13 (jj) "ENRA" means that certain Exclusive Negotiating Rights Agreement between the County and Related dated as of February 26, (kk) "Escrow" means the escrow established with the Title Company for the purpose of leasing the Affordable Development Parcel from the County to the Affordable Developer and leasing the Library Parcel from the County to the Library Developer. (ll) Section 4.10 below. "Evidence of Insurance Coverage" has the meaning set forth in (mm) "Final Map" means the final parcel or subdivision map (including any condominium plan or condominium map) based on the Tentative Parcel Map, approved by the County and recorded either immediately prior to, or concurrent with the conveyance of the Affordable Development Parcel and the Library Parcel which subdivides the Property as contemplated hereunder. (nn) First Amendment to Disposition Agreement means the form of the First Amendment to Disposition, Development and Funding Agreement, substantially in the form attached hereto as Exhibit L, incorporated herein by this reference. The parties expect to execute the First Amendment to Disposition Agreement upon the admission of the Grantee as a general partner of the Affordable Developer and approval of the Grantee s board of this Agreement. hereof. (oo) "Governmental Approvals" has the meaning set forth in Section 5.5 (pp) "Grantee" means either: (i) Housing Partners I, Incorporated, a California nonprofit public benefit corporation or a limited liability company in which Housing Partners, I is the sole member; or (ii) a qualified nonprofit public benefit corporation approved in writing by the County, or a limited liability company in which the qualified nonprofit public benefit corporation approved by the County is the sole member. The Grantee will receive the County Grant and contribute the entire County Grant funds to the Affordable Developer (in the form of a capital contribution) in the Grantee s capacity as a general partner of the Affordable Developer. (qq) "Gross Revenue" with respect to a particular calendar year, means all revenue, income, receipts, and other consideration actually received from operation and leasing of the Affordable Development, including but not limited to: (i) all rents, fees and charges paid by tenants, payments or other rental subsidy payments received for the dwelling units, deposits forfeited by tenants, all cancellation fees, price index adjustments and any other rental adjustments to leases or rental agreements resulting in actual income; (ii) The proceeds of business interruption or similar insurance; (iii) Any payment received in consideration for the leasing or other use of any portion of the Affordable Development; 8

14 (iv) Subject to the rights of Senior Lenders, the proceeds of casualty insurance to the extent not utilized to repair or rebuild the Affordable Development (or applied toward the cost of recovering such proceeds); (v) Subject to the rights of Senior Lenders, condemnation awards for a taking of part or all of the Affordable Development for a temporary period; and (vi) Gross Revenue shall exclude tenants' security deposits, loan proceeds, capital contributions or other similar advances. (rr) "Hazardous Materials" means any flammable explosives, radioactive materials, hazardous wastes, toxic substances or related materials, including without limitation, any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," or "toxic substances" under any applicable federal or state laws or regulations, except such of the foregoing as may be customarily used in construction of projects like the Phase I Development or kept and used in and about residential property of this type. (ss) "Hazardous Materials Claim" means respectively: (1) from and after the execution of the Housing Lease, any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against the Affordable Developer or the Affordable Development pursuant to Hazardous Materials Laws; or (2) from and after the execution of the Library Lease, all claims made or threatened by any third party against the Library Developer or the Library Development relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials. (tt) "Hazardous Materials Laws" means all federal, state, and local laws, ordinances, regulations, orders and directives pertaining to Hazardous Materials in, on or under the Phase I Development or any portion thereof. Development. (uu) "HCD" means the California Department of Housing and Community (vv) "Housing Asset Funds" means funds on deposit in the County's Low and Moderate Income Housing Asset Fund created pursuant to Health and Safety Code Section 34176(d) which the County is authorized to use in a manner consistent with the affordable housing requirements of the Community Redevelopment Law. (ww) "Housing Lease" means the long-term lease between the County and the Affordable Developer under which the Affordable Developer shall lease the Affordable Development Parcel from the County, substantially in the form of Exhibit D-1, incorporated herein by this reference. Development. (xx) "HUD" means the United States Department of Housing and Urban (yy) "Infrastructure Component" means that portion of the County Loan, in the approximate amount of Three Million Four Hundred Seventy-Six Thousand Dollars ($3,476,000) 9

15 to be disbursed to the Affordable Developer, subject to the disbursement conditions set forth in Section 3.6 of this Agreement, to finance the construction of the Infrastructure Improvements (including for payment of impact fees). (zz) "Infrastructure Improvements" means the Sewer Improvements and the Water Improvements necessary to serve the Development. (aaa) "Leases" means the Housing Lease and the Library Lease. (bbb) "LaBarge Industries" means LaBarge Industries, Inc., a California corporatoin. The Affordable Developer intends to admit LaBarge Industries as a general partner of the Partnership. (ccc) "Leasehold Deed of Trust" means the leasehold deed of trust that will encumber the Affordable Developer's leasehold interest in the Affordable Development Parcel to secure repayment of the Promissory Note, substantially in the form attached hereto as Exhibit G. (ddd) "Lender's Share of Residual Receipts" means fifty percent (50%) of the Residual Receipts. (eee) "Library Development" means the Library Parcel and the Library Improvements. (fff) "Library Developer" means Bloomington Library Developer, LLC, a California limited liability company, which will be the owner of the Library Improvements. (ggg) "Library Facility Lease" means the lease between the Library Developer, as landlord, and the County, as tenant, under which the Library Developer shall lease specified interior space in the Library Improvements to the County, substantially in the form attached hereto as Exhibit J, incorporated herein by this reference. (hhh) "Library Funding" means the approximately Two Million Seven Hundred Five Thousand Dollars ($2,705,000) of NSP 1 Program Income and CDBG Funds that the County will make available to the Library Developer to fund the construction of the Library Improvements pursuant to the terms of the Library Lease. (iii) "Library Improvements" means the approximately 6,500 square foot public Library Improvements required to be developed on the Library Parcel, pursuant to the terms of this Agreement. (jjj) "Library Lease" means the airspace lease between the County, as landlord, and the Library Developer, as tenant, under which the County shall lease the Library Parcel to the Library Developer, substantially in the form attached hereto as Exhibit D-2, incorporated herein by this reference. (kkk) "Library Parcel" means the certain condominium parcel, on which the Library Improvements will be constructed, as designated on the Final Map that will be recorded prior to the Close of Escrow. 10

16 (lll) "Low Income Household" means a household with an adjusted income that does not exceed eighty percent (80%) of area median income, adjusted for actual household size. (mmm)"management Agent" means a management agent retained by the Affordable Developer and approved by the County in accordance with the provisions of Sections 8.8 and 8.9 to manage the Affordable Development. below. (nnn) "Management Plan" shall have the meaning specified in Section 8.8 (ooo) "Marketing Plan" has the meaning set forth in Section 8.14 below. (ppp) "Memorandum of DDA" means the memorandum of the Disposition, Development and Funding Agreement to be recorded against the Affordable Development Parcel on the Close of Escrow. The form of the Memorandum of DDA is attached as Exhibit O. (qqq) "Memorandum of Housing Lease" means the memorandum of the Housing Lease to be recorded against the Affordable Development Parcel on the Close of Escrow. The form of the Memorandum of Housing Lease is attached as Exhibit H-1. (rrr) "Memorandum of Library Lease" means the memorandum of the Library Lease to be recorded against the Library Parcel on the Close of Escrow. The form of the Memorandum of Library Lease is attached as Exhibit H-2. (sss) "MHSA Funds" means funds allocated to the County from the California Department of Mental Health, ("DMH") pursuant to Proposition 63, the Mental Health Services Act which must be used by the County in accordance with the Act and California Code of Regulations Title 9, Section 3100, et seq. (ttt) "NEPA" means the National Environmental Policy Act of 1969, as amended (42 U.S.C ). (uuu) "Net Excess Proceeds" means the portion of the Approved Financing for the construction of the Affordable Development that is not required to pay the costs of acquisition and development of the Affordable Development (including but not limited to the funding of reserves and repayment of construction financing). Net Excess Proceeds, if any, shall be determined pursuant to the procedure set forth in Section 3.5(c). (vvv) "Notice of Affordability Restrictions" means the Notice of Affordability Restrictions on Transfer of Property, in a form to be provided by the County, between the County and the Affordable Developer to be recorded against the Affordable Development Parcel at the Close of Escrow, pursuant to Sections and/or 33413(c)(5) of the Community Redevelopment Law, or successor provisions. (www) "NSP1 Program" means the Neighborhood Stabilization Program established under Title III of Division B of the Housing and Economic Recovery Act of

17 (xxx) "NSP1 Program Income" means program income received by the County under the NSP1 Program. (yyy) "NSP3 Act" means Section 1497 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of NSP3 Act. (zzz) "NSP3 Funds" means funds allocated to the County from HUD under the (aaaa) "NSP3 Predevelopment Loan" has the meaning set forth in Recital D. (bbbb) "NSP3 Program" means the Neighborhood Stabilization Program 3 established pursuant to the NSP3 Act. (cccc) "NSP3 Regulations" means the statutory and regulatory provisions that govern the CDBG Program under Title I of the Housing and Community Development Act of 1974 (42 U.S.C et seq.), as amended (including those at 24 C.F.R. part 570 subparts A, C, D, J, K, and O, as appropriate), which apply with equal force to the NSP3 Funds. (dddd) "NSP3 Requirements" means the NSP3 Act and the NSP3 Regulations. (eeee) "NSP Term" means the period which shall commence on the Effective Date and shall continue until the twentieth (20th) anniversary of the Effective Date, or that date of earlier termination pursuant to the terms of this Agreement. (ffff) "Official Records" means the official records of the County of San Bernardino, California. (gggg) "Operating Memorandum" has the meaning given in Section below. (hhhh) "Parties" means the County and both of the Developers, and the term Party shall refer to each of them individually. (iiii) "Partnership" means Bloomington I Housing Partners, L.P., a California limited partnership, a partnership created for the purpose of syndicating the low income housing tax credits, which will own the Affordable Development and is herein also referred to as the Affordable Developer. (jjjj) "Permanent Financing" means the sources of approved permanent financing for the Affordable Development as listed in the Financing Plan for the Affordable Development approved by the County pursuant to Section 5.6 and as may be amended. (kkkk) "Phase I Development" means the Affordable Development and the Library Development. (llll) "Phase II Development" means the Phase II Development Parcel and the Phase II Development Improvements. 12

18 (mmmm) "Phase II Development Improvements" means the approximately eighty-four (84) units of affordable multi-family rental housing, including one (1) manager's unit, all common areas, amenities, appurtenances, improvement easements, buildings and fixtures associated with the Phase II Development. (nnnn) "Phase II Development Parcel" means the certain 3.39 acre portion of the Property, on which the Phase II Development will be constructed and as depicted on the Conceptual Site Plan attached hereto as Exhibit A-2, incorporated herein by this reference. (oooo) "Predevelopment Component" means that portion of the County Loan, in the approximate amount of Two Million Three Hundred Ninety-Five Thousand Dollars ($2,395,000), subject to the disbursement conditions set forth in Section 3.6 of this Agreement. (pppp) "Promissory Note" shall mean the promissory note that will evidence the Affordable Developer's obligation to repay the County Loan as set forth in this Agreement, substantially in the form of Exhibit F. (qqqq) "Property" has the meaning set forth in Recital A. (rrrr) "Reciprocal Easement Agreement" means the declaration of reciprocal easements to be executed by the Developers and recorded against the Affordable Development Parcel and the Library Parcel providing for the joint use of certain areas, access, maintenance, and support for the Development. The form of Reciprocal Easement Agreement will be approved by the County, the Library Developer and the Affordable Developer at their reasonable discretion. (ssss) "Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants that will be recorded against the Affordable Developer's leasehold interest in the Affordable Development Parcel upon execution of the Housing Lease and will restrict the Affordable Development and use of the Affordable Development Parcel to affordable housing, the form of which is attached hereto as Exhibit E. (tttt) "Related" means The Related Companies of California, LLC, a California limited liability company. (uuuu) "Related Affiliate" means an entity in which Related has: (i) direct or indirect management or control of the managing member or members in the case of a limited liability company; (ii) direct or indirect management or control of the managing general partner or general partners in the case of a limited partnership; and (iii) board of directors that overlap by fifty percent (50%) or more of their directors, or direct or indirect control of a majority of the directors in the case of a corporation. (vvvv) "Residual Receipts" in a particular calendar year shall mean the amount by which Gross Revenue exceeds Annual Operating Expenses. (wwww) "Schedule of Performance" means the summary schedule of actions to be taken by the Parties pursuant to this Agreement to achieve the disposition of the 13

19 various parcels and the development of the Phase I Development. The Schedule of Performance is attached to this Agreement as Exhibit B. (xxxx) "Security Financing Interest" has the meaning set forth in Section (yyyy) "Senior Lender" has the meaning set forth in Section 3.10(b)(ii) below. (zzzz) "Sewer Improvements" means the off-site sewer infrastructure improvements required to be installed to provide sewer service to the Phase I Development, as further described in the attached Exhibit K, incorporated herein by this reference. Section 4.8. (aaaaa) "Supplemental Operating Expense Reserve" has the meaning set forth in (bbbbb) "Tax Credit Funds" means the proceeds from the sale of a limited partnership interest in the Partnership to a Tax Credit Investor in the anticipated amount set forth in the Approved Financing Plan, or such other amount as may be approved by the County in an amendment to the Approved Financing Plan. (ccccc) "Tax Credit Investor" means the entity that, in consideration of an allocation of Tax Credits, acquires a limited partner interest in the Partnership. (ddddd) Credits from TCAC. "Tax Credit Reservation" means a preliminary reservation of Tax (eeeee) "Tax Credits" means Low Income Housing Tax Credits granted pursuant to Section 42 of the Internal Revenue Code and/or California Revenue and Taxation Code Sections , 17058, and and California Health and Safety Code Sections 50199, et seq. (fffff) "TCAC" means the California Tax Credit Allocation Committee. (ggggg) "Tentative Parcel Map" means the tentative parcel map approved by the County on December 17, (hhhhh) "Term" means the term of this Agreement, which shall commence on the Effective Date and shall continue until the fifty-seventh (57 th ) anniversary of the Effective Date; or that date of earlier termination pursuant to the terms of this Agreement. (iiiii) "Title Company" means the Oakland, California office of Old Republic Title Company, located at 180 Grand Ave, Suite 850, Oakland, CA 94612, unless modified pursuant to Section 6.2. (jjjjj) "Transfer" has the meaning set forth in Section 9.1. (kkkkk) "Water Improvements" means the off-site water infrastructure improvements required to be installed to provide water service to the Phase I Development, as further described in the attached Exhibit K, incorporated herein by this reference. 14

20 Section 1.2 Exhibits. The following exhibits are attached to and incorporated in the Agreement: Exhibit A-1: Legal Description of the Property Exhibit A-2: Conceptual Site Plan Exhibit B: Schedule of Performance Exhibit C: Approved Financing Plan Exhibit D-1: Housing Lease Exhibit D-2: Library Lease Exhibit E: Regulatory Agreement Exhibit F: Promissory Note Exhibit G: Leasehold Deed of Trust Exhibit H-1: Memorandum of Housing Lease Exhibit H-2: Memorandum of Library Lease Exhibit I: Form of Residual Receipts Report Exhibit J: Library Facility Lease Exhibit K: Scope of Water Improvements and Sewer Improvements Exhibit L: Form First Amendment to Disposition Agreement Exhibit M: Special Terms and Conditions Exhibit N: Completion Guaranty Agreement Exhibit O: Memorandum of DDA Exhibit P: Form of Certificate of Completion ARTICLE 2. PURPOSE AND OVERVIEW Section 2.1 Scope and Purpose of Agreement. The Bloomington Mixed-Use Development is a multi-phased mixed use housing, commercial, and community use development. This Agreement addresses the construction and operation of the Phase I Development (including the required Infrastructure Improvements). The purposes of this Agreement, as more specifically set forth herein, are to: (1) provide for the orderly subdivision of the Property; (2) cause the construction and completion of the Phase I Development; (3) cause the lease of the interior portion of the Library Improvements to the County to enable the County to operate a public library therein; and (4) set forth the ongoing requirements for the operation and maintenance of the Phase I Development. Section 2.2 Phase I Property. (a) Land Interests as of Effective Date. As of the Effective Date, and prior to the recordation of the Final Map, the County owns the fee interest in the entire Property. (b) Land Interests Following the Close of Escrow. Following the recordation of the Final Map and the Close of Escrow the Parties will hold the following interests in real property: 15

21 (i) The Affordable Developer will hold a leasehold interest in the Affordable Development Parcel pursuant to the Housing Lease; (ii) The Library Developer will hold a leasehold interest in the Library Parcel pursuant to the Library Lease; (iii) The County will own the fee interest in the Affordable Development Parcel, subject to the Housing Lease; (iv) to the Library Lease; and The County will own the fee interest in the Library Parcel, subject Parcel. (v) The County will own the fee interest in the Phase II Development (c) Library Improvement after Completion. Once constructed, the Library Improvements will constitute a part of the leasehold interest in the Library Parcel and shall become affixed to the Library Developer's leasehold interest in the Library Parcel. Upon the Close of Escrow, the Library Developer will lease specified space located within the Library Improvements to the County pursuant to the terms of the Library Facility Lease and, pursuant to the Library Facility Lease, the County will take possession of specified interior portions of the Library Improvements upon completion of the construction of the Library Improvements. Section 2.3 Effect on Prior Agreements. (a) Termination of ENRA as to Phase I Development. As of the Effective Date of this Agreement, the ENRA is terminated as to the Affordable Development Parcel and the Library Parcel. (b) Termination of Predevelopment Loan Agreement. As of the Effective Date of this Agreement, the Predevelopment Loan Agreement is terminated and superseded by the terms of this Agreement. Section 2.4 Recordation of Memorandum of this Agreement. As part of the Close of Escrow, the Memorandum of DDA will be recorded against the Affordable Developer's leasehold interests in the Affordable Development Parcel and the Library Developer's leasehold interest in the Library Parcel, subject only to such liens, encumbrances and other exceptions to title approved in writing and in advance by the County, or as otherwise set forth in this Agreement. ARTICLE 3. COUNTY LOAN PROVISIONS Section 3.1 County Loan. 16

22 Subject to adjustments pursuant to Section 5.1(b) below, the County shall provide the County Loan to the Affordable Developer as predevelopment and construction financing for the Affordable Development in the principal amount not to exceed Five Million Eight Hundred Seventy-One Thousand Dollars ($5,871,000) consisting of NSP3 Funds, County affordable housing funds and Housing Asset Funds. The Affordable Developer's obligation to repay the County Loan shall be evidenced by the Promissory Note and secured by the Assignment Agreement, which shall be executed by the Affordable Developer concurrently herewith. Section 3.2 Interest. (a) Subject to the provisions of Section 3.2(b) below, the County Loan shall bear zero percent (0%) interest. (b) Upon the occurrence of a Default by Affordable Developer that remains uncured after expiration of the applicable cure period, at the County's option, the principal amount of the County Loan shall be immediately due and payable, and shall bear interest at the lesser of ten percent (10%) per annum or the maximum rate permitted by law, which will accrue, as of the date of Default and continue until such time as the County Loan funds are repaid in full or the Default is cured. In this regard, payments received from the Affordable Developer shall be applied first to interest accrued and the remaining balance, if any, to principal. Section 3.3 Use of County Loan. (a) Predevelopment and Acquisition Component. The Predevelopment Component of the County Loan has been or shall be used solely for predevelopment and acquisition activities, in accordance with the Approved Financing Plan. (b) Infrastructure Component. The Infrastructure Component of the County Loan shall be used solely to finance the development of the Infrastructure Improvements (including but not limited to payment of impact fees and permit fees associated therewith), in accordance with the Approved Financing Plan and as further described in Exhibit K with respect to the Water Improvements and the Sewer Improvements. (c) Other Uses Prohibited. The Affordable Developer shall not use the County Loan funds for any other purpose without the prior written consent of the County. Section 3.4 Security. (a) Assignment of Collateral Documents. The Affordable Developer's obligations under this Agreement shall be secured by the Assignment Agreement. The Affordable Developer will grant to the County, pursuant to the Assignment Agreement, a valid, second priority, continuing security interest in all of the Affordable Developer s right, title, and interest presently existing and after-acquired or arising Collateral in order to secure prompt, full and complete payment of any and all obligations to the County under this Agreement and in order to secure prompt, full and complete performance by Affordable Developer of each of its covenants and duties under each of the County Loan Documents. For purposes hereof, the Collateral Documents subject to the Assignment Agreement shall expressly exclude any 17